Tuesday, 10 December 2013

I used to be a great believer in "trickle-down". Up until 1980, there was evidence that it always worked. This evidence couldn't be ignored.

However,
I did not foresee that there was a tipping-point in the concentration
of wealth where it made far more economic sense to buy the government than to invest in plant.

This
means that regulations which restrain monopolistic and anti-competitive
practices are repealed or not enforced, while ever more burdensome
regulations that strangle upstart competitors at birth are enacted. The
more of the latter there are, the more persuasive the argument to relax
regulations against the big boys. The more the big boys get away with
murder, the more persuasive the argument for regulations and yet more
regulations that only affect the small end of town in practice.

Trickle-down
cannot help but grow an economy in an absolute sense; but when the
distribution is too concentrated, most of the growth ends up in the
hands of a very few, while the median standard stays steady, growing
very slowly. In pathological cases, not just all the growth, but over
100% of it ends up in the hands of those who control the legislatures,
and the median standard actually falls, as in the USA today.

This
leads to a runaway effect, where 1% of the populace holds more national
wealth than the rest of the country put together. The US hasn't reached
that state yet, but it's 40% in 2013, and likely to hit over 50% soon,
with 60, 70, 80% to come. The trend is clear, the concentration
accelerating.

The
result ' "too big to fail, too big to jail" is already visible.
Disrupting the system by putting the brakes on would cause economic
chaos, hence the need for bailouts and ever increasing corporate
welfare. There are already commercial organisations essentially immune
from legal sanction. Examples of CEOs paying less tax in absolute terms
than their secretaries, and ridiculously less in relative terms,
abound.

For at least half a decade, the storied British colonial banking
power helped to wash hundreds of millions of dollars for drug mobs,
including Mexico's Sinaloa drug cartel, suspected in tens of thousands
of murders just in the past 10 years – people so totally evil, jokes
former New York Attorney General Eliot Spitzer, that "they make the guys
on Wall Street look good." The bank also moved money for organizations
linked to Al Qaeda and Hezbollah, and for Russian gangsters; helped
countries like Iran, the Sudan and North Korea evade sanctions; and, in
between helping murderers and terrorists and rogue states, aided
countless common tax cheats in hiding their cash.

"They violated every goddamn law in the book," says Jack Blum, an
attorney and former Senate investigator who headed a major bribery
investigation against Lockheed in the 1970s that led to the passage of
the Foreign Corrupt Practices Act. "They took every imaginable form of
illegal and illicit business."

That nobody from the bank went to jail or paid a dollar in individual
fines is nothing new in this era of financial crisis. What is different
about this settlement is that the Justice Department, for the first
time, admitted why it decided to go soft on this particular kind of
criminal. It was worried that anything more than a wrist slap for HSBC
might undermine the world economy.

"Had the U.S. authorities decided to
press criminal charges," said Assistant Attorney General Lanny Breuer at
a press conference to announce the settlement, "HSBC would almost
certainly have lost its banking license in the U.S., the future of the
institution would have been under threat and the entire banking system
would have been destabilized."

Remember what I said : The
result ' "too big to fail, too big to jail" is already visible.
Disrupting the system by putting the brakes on would cause economic
chaos, hence the need for bailouts and ever increasing corporate
welfare. There are already commercial organisations essentially immune
from legal sanction. When it comes to wealth distribution... from HuffPo

The United States has such an unequal distribution of wealth so that
it's in the league of corrupt underdeveloped countries, no longer in the
league of the developed nations, according to the latest edition of the
world's most thorough study of wealth-distribution.

The most authoritative source comparing wealth-concentration in the
various countries is the successor to the reports that used to be done
for the United Nations, now performed as the Credit Suisse Global Wealth Databook. The latest (2013) edition of it
finds (p. 146) that in the U.S., 75.4% of all wealth is owned by the
richest 10% of the people.

Those are the top 20 developed nations, and the U.S. has
the most extreme wealth-concentration of them all. However, there are
some other countries that have wealth-concentrations that are about as
extreme as the U.S. For examples: Chile 72.5%, India 73.8%, Indonesia
75.0%, and South Africa 74.8%. The U.S. is in their league; not in the
league of developed economies. In the U.S., the bottom 90% of the
population own only 24.6% of all the privately held wealth, whereas in
most of the developed world, the bottom 90% own around 40%; so, the
degree of wealth-concentration in the U.S. is extraordinary (except for
underdeveloped countries).

The broadest mathematical measure of wealth-inequality is called "Gini," and the higher it is, the more extreme
the nation's wealth-inequality is. The Gini for the U.S. is 85.1. Other
extremely unequal countries are (pages 98-101 of this report) Chile
81.4, India 81.3, Indonesia 82.8, and South Africa 83.6. However, some
nations are even more-extreme than the U.S.: Kazakhstan 86.7, Russia
93.1, and Ukraine 90.0. But Honduras and Guatemala are such rabid
kleptocracies that their governments don't even provide sufficiently
reliable data for an estimate to be able to be made; and, so, some
countries might be even higher than nations like Russia.

At current rates, the Gini for the USA will be in the low 90's by 2020: the trend is accelerating, not tailing off.

7 comments:

My partner just linked me this today and it feels relevant to this post, how there needs to be some balance in worldviews between the two current 'competing ideologies' (for lack of a better term), capitalism and socialism.

Hope you find it interesting, I did. As a citizen of both the US and Australia, it drives me mad to see Australia barrelling down the road idealising the worst parts of America. I've been there, and it depresses me that the US has fallen so far, let alone watching a second home do so as well.

Growth is not an option in a finite world with finite resources.Having more children than you can afford and living on government handouts is not a solution.Each individual needs to be responsible for their own needs and their children's needs including education.

Depends on what you mean by trickle down. If you mean a mostly laissez-faire system, I'd agree that it works--but I'd say that it isn't what we have now in the US. Liberals (in the US sense) keep saying "big business is the root of all our economic problems, we need to tax and regulate them"...while big business mostly embraces the regulation.

"We have estimated, for example, that less than 100,000 people, .001% of the world’s population, now control over 30 percent of the world’s financial wealth."

"...this unrecorded wealth might have generated tax revenues of $189 billion per year – more than twice the $86 billion that OECD countries as a whole are now spending on all overseas development assistance."

About Me

Actually, I am a Rocket Scientist.
Also hormonally odd (my blood has 46xy chromosomes anyway) and for most of my life, I looked male, and lived as one, trying to be the best Man a Gal could be. Anyway, in May 2005 that started changing naturally for reasons still unclear, and I'm now Zoe, not Alan : happier and more relaxed not to have to pretend any more.
UPDATE - reason now identified as the 3BHSD form of CAH.

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This blog, written by a rocket scientist, is a fascinating collection of information, both personal and scientific, regarding intersex, transsexualism and related psychosocial and psychosexual issues....It is erudite and heartfelt. Just read the posts about the passport issue. You won't know whether to laugh, weep or crawl into a ball and rock gently in a corner - an amazing person.- David---The reason I so appreciate bright, perceptive people - as opposed to ideologues whose intelligence does little to illuminate - is that they manage to both instruct and learn with a certain grace. Among such rarities in the transblogosphere is Zoe, whose direct speech and clear humanity always make her worth reading, even if one doesn’t always agree with her every conclusion.- Val---The following is a request for permission to archive your A.E.Brain blog site which we have wanted to do for several years...The Library has traditionally collected items in print, but it is also committed to preserving electronic publications of lasting cultural value....Since (1996) we have been identifying online publications and archiving those that we consider have national significance....We would like to include A.E.Brain blog site in the PANDORA Archive...-Australian National Library